The City of Falls Church abruptly suspended Friday’s planned auction of its water utility after the federal agency that now supplies the city with water determined that the agency could not sell water to a privately owned utility — a legal finding that appeared to contradict another from the same agency two months earlier.

The turn of events means the focus of the long-running water war between Fairfax County and Falls Church — whose stakes involve thousands of customers’ utility bills and hookup charges for developers in Tysons Corner and elsewhere — is likely to return to court.

Less than 24 hours before Falls Church had planned to auction its water utility for at least $44 million, city officials called off the sale, citing a legal ruling from the U.S. Army Corps of Engineers that the corps’ Washington Aqueduct, which supplies the city’s water, can provide water from the Potomac River only to a publicly owned utility.

Earl Stockdale, chief counsel for the Corps, said that after reviewing a 1947 federal statute, he concluded that Congress gave authority to the corps to deliver water from the Washington Aqueduct “only to governmental entities,” according to an e-mail sent to Fairfax County officials. Stockdale said his May 17 opinion is also consistent with a 1963 opinion issued by the Corps.

Falls Church officials, however, had arranged to open the bidding for the city’s water system to any qualified buyer, including investor-owned utilities, based on an opinion written by another lawyer for the Corps who reviewed the same 1947 law.

A March 8 memorandum — written by Susan Greenwood, the corps’ senior counsel for legislation and obtained by The Washington Post — says the secretary of the Army has the authority and the discretion to deliver the water to Falls Church regardless of the utility’s ownership, as long as the request was made by the city’s governing body.

“By its terms, the Act makes clear that the delivery of water is to the water system of Falls Church and for the purpose of providing water for the use of the City of Falls Church. Thus, the provision is not limited to the provision of water to the local government, i.e., the City of Falls Church,” Greenwood’s memorandum says.

“It’s unfortunate the Army has reversed itself,” Falls Church City Manager Wyatt Shields said. On Friday, city officials were still trying to determine what happened and why the Corps issued conflicting legal opinions. Requests for comment from the Corps have not been answered.

For years, Falls Church and surrounding Fairfax County have clashed over the city’s treatment of customers outside its borders who receive water from its system. In years past, Falls Church billed customers above cost and transferred the surplus revenues to its general fund, a practice that city officials said was common among municipal water utilities and justified by their investment in them.

From 1981 to 2008, Falls Church collected more than $58 million. A Fairfax County court halted the arrangement in January 2010, saying the city was effectively imposing an unconstitutional tax.

Last year, Fairfax County’s Board of Supervisors voted to assume authority over water rates for all county customers, included those served by municipal utilities in Falls Church, the City of Fairfax, Herndon and Vienna. The county also asserted the right to establish exclusive service areas for Fairfax Water, the county-controlled utility that supplies most water in the county.

In response, Falls Church put its water utility up for sale. The city also took legal action against the county, as did Vienna and the City of Fairfax. The pending litigation, which has been moved to federal court, will be the subject of a hearing before U.S. District Court Judge Leonie M. Brinkema next month.

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